For many of us, this is the first recession where we are responsible for our own financial well-being. How should we react? What habits are important during a long, deep recession?
9 Good Habits For A Deep Recession
- Keep A Cool Head
Freaking out and selling all of your investments, or stopping your contributions to your 401k because you’re panicking isn’t going to help you in the long term. Don’t put your emotions in charge of your money.
- Learn To Dislike Debt And Pay It Off
So-called “consumer debt” is your enemy during a recession. Pay it off as quickly as you can. This type of debt includes car loans and credit cards. A good way to tackle the debt is to start with the loans that have the highest interest rates. Another strategy is called the “debt snowball.” It doesn’t matter how you do it, just do it.
- Know Where Your Money Is Going
There are lots of different ways to track your spending and make a budget. There are online solutions, such as Mint.com and Wesabe.com. You could also use Quicken or Microsoft Money. Or you can do it yourself.
Suggested Reading: 8 Free Personal Finance Management Programs
- Eliminate Waste
Once you’ve taken an inventory of your spending, think about how to shrink it. It’s not just about cutting back, it’s about plugging the money leaks. What are you spending money on that you don’t really need or even use? Everyone can probably find at least one thing.
Suggested Reading: 10 Stupid Ways Smart People Waste Money
- Buy Smart
If you were going to spend a couple hundred dollars on some electronics — you’d do a little research right? So why not do a little planning before you go grocery shopping? A little thinking before you shop can save you a bunch of money — even without using coupons.
Suggested Reading: 7 Ways To Save On Groceries Without Using Coupons
- Buy Used
Used cars, used clothes, used furniture. Buying a high quality used item is often smarter than buying a cheaply made new item. A late model used car is a better value than a new car. Check craigslist or flea markets for cool furniture that needs a loving home. Thrift stores are like a treasure hunt. If you are going to buy a new item — by a high quality product and research it before buy.
Suggested Reading: Shopping Strategy Of Millionaires: Buy Used Or High Quality.
- Tidy Up Your Finances
Next year might be a good time to refinance, so make sure that your credit score is good and your finances are in order. If you need to check your credit report, you are entitled to one free report per year from each of the credit bureaus. Go to www.annualcreditreport.com.
- Understand Your Investments
Make sure you understand what your are investing in and the level of risk that you are taking on. Do a little homework and make sure that your financial adviser, if you have one, is not a crook. Here are some good places to start: Certified Financial Planner Board Of Standards, and FINRA BrokerCheck.
- Keep Cash On Hand
You should have an emergency fund, with 3-6 months of living expenses in a savings account. You can also save money by paying cash. In a recession, cash is your friend.
(Photo: onohoku )